06/07/2004 - 22:00

All part of the service

06/07/2004 - 22:00

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Serviced office providers are being under-utilised in the Australian market, according to some in the industry, with much of that due to a misunderstanding of what the service entails.

All part of the service

Serviced office providers are being under-utilised in the Australian market, according to some in the industry, with much of that due to a misunderstanding of what the service entails.

Serviced office providers usually offer tenants small office spaces, complete with communications infrastructure, fit-out, shared support staff and facilities.

Representatives from two providers contacted by WA Business News, Servcorp and Regus, said while most of their clients were large international corporations, there was a misperception that the serviced office market was only utilised by very small, start-up operations.

Both businesses acknowledged the market in Perth was particularly difficult, given current high vacancy rates and the incentives being offered by building owners to attract tenants.

But both Servcorp and Regus maintain the market will pick up.

Generally, serviced office providers lease large spaces, which they divide and furnish, and then sub-let to tenants. Facilities such as boardrooms, kitchen, and support staff are shared.

Servcorp general manager for Australia and the Middle East, Taine Moufarrige, said the company had offices over 50 floors in 33 different locations around the world, and had an annual turnover of $120 million.

“We choose the best buildings in the best cities, and have recently moved in to the top floor of 140 St Georges Terrace in Perth,” Mr Moufarrige said.

Servcorp’s clients can choose to be ‘virtual’ and not occupy any actual office space, but still utilise services, or lease actual space. Mr Moufarrige estimated that 10 per cent of company turnover was from virtual clients.

Virtual tenants can utilise reception services, use the building address, and hold meetings in the boardroom, while not physically occupying any office space.

“The market for office space is really competitive, particularly over the last two or three years, but serviced offices can be a very efficient way for businesses to operate,” Mr Moufarrige said.

“For a business of between one and 10 people it is cost effective because you save on the costs of lease risk, rental scale, fit-out, support staff and communication infrastructure, but any more than 10 people and businesses are better off in their offices.”

UK-listed Regus has 400 sites throughout the world on long-term leases, something which south Asia general manager Ian Wheeler said made it simple for companies to simply walk in and start working.

“With a downturn in the global market following events like September 11 and SARS, a large number of companies have found themselves in much more space then they need,” Mr Wheeler said.

“As we go into the next cycle, corporates will be considering how they place themselves, and if they place a premium on flexibility, it is an advantage to stay outsourced.

“Right now we are seeing people being added into teams across Asia, which is positive.”

Mr Wheeler’s recommended cut-off point for outsourcing office services was between 10 and 15 people, with a lease of less than two years.

In an example of multi-national utilisation of outsourced office space, Mr Wheeler said, Nokia had signed a global agreement to transfer about 10,000 employees to Regus centers over the next five years.

“In the US, 5 per cent of people go to work in outsourced office space, whereas in Australia it is only 1 to 1.5 per cent, but we believe that number will grow,” he said.

CB Richard Ellis commercial leasing director Andrew Denny said serviced offices could provide answers for businesses with certain needs.

He said there were positives and negatives to the outsourced office market, depending on what an occupier needed.

“Serviced offices do provide flexibility in terms of length of lease, and if a business is small there can be big benefits. But if they are seeking their own profile and reception area, it can be better to lease,” Mr Denny said.

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